Strategy, Values and preferences of management

Strategy

Values and Preferences of Management

• Core values

• Mission and vision statements

• Objectives

Environment

Macro-Environment (ECS p.55)

Political Economic

Social Technological

Environmental Legal

Industries and Sectors (ECS p.59)

Threat of Entry

• Scale and experience

• Access to supply or distribution channels

• Expected retaliation

• Legislation or government action

• Differentiation

Threat of Substitution

• Price/Performance Ratio

• Extra industry effects

Power of Buyers

• Concentrated Buyers

• Low Switching Costs

• Buyer Competition Threat

Power of Suppliers

• Concentrated Suppliers

• High Switching Costs

• Supplier Competition Threat

Competitive Rivalry

• Competitor Balance

• Industry growth rate

• High fixed costs

• High end barriers

• Low differentiation

Complementary Products

• Cooperation

• Complementors

Implications (ECS p.66)

• Which industries to enter / leave?

• What influence can be exerted?

• How are competitors differentially affected?

Industry Life Cycle (ECS p.68)

Development Low Rivalry High differentiation. Innovation key

Growth Low Rivalry High growth and weak buyers, but low entry barriers. Growth ability key

Shake-out Increasing Rivalry Slower growth and some exits. Managerial and financial strength key

Maturity Stronger buyers Low growth and standard products, but higher entry barriers. Market share and cost key

Decline Extreme Rivalry Typically many exits and price competition. Cost and commitment key

Resources and Capabilities (ECS p. 95)

Resources Competencies

Threshold capabilities Threshold Resources

• Tangible (plant, labour, finance)

• Intangible (information, reputation, knowledge) Threshold competencies

Capabilities for competitive advantage Unique Resources

• Tangible

• Intangible Core competencies

Sources of Cost efficiencies (ECS p.99)

• Threshold strategic capability because:

o Customers do not value product features at any price

o Competitive Rivalry

• Cost drivers:

o Economies of scale

o Supply costs

o Product/process design

o Experience

o Growth is not optional

o Unit costs should decline year on year

o First-mover advantage

Rarity of strategic capabilities (ECS p. 102)

• Ease of transferability

• Sustainability

• Core rigidities

Competitive Advantage

Characteristics

• Inimitability – hard to copy

• Durability – long lasting

• Appropriability – who gets the value?

• Non-substitutability – unique

• Competitive superiority – battle-tested

Strategies (ECS p.222)

Bases of Competitive Strategy Achieving Competitive Advantage

• Price

• Differentiation

• Hybrid

• Focus • Sustainability

• Hypercompetitive strategies

• Collaboration

• Game Theory

Competitive Strategy Options (ECS p.225)

Price ‘No frills’ • Likely to be segment specific

• Buyers have high power and/or low switching costs

• Opportunity to avoid major competitors

• Existence of commodity markets

Low price • Risk of price war and low margins; need to be cost leader

• Margin reductions for all

• Inability to reinvest

Differentiation Hybrid • Low cost base and reinvestment in low price and differentiation

• Greater

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